Stake Academy - Tax Time In Australia
Invest in knowledge and continue your investing education with our quick Stake Academy crash course on things to know at tax time.
With tax time approaching, we’ve put together a non-exhaustive list of considerations to help you make more informed decisions when considering your tax obligations. Everyone’s situation is different though, so be sure to seek some personal advice from a tax professional.
Tax Events
Any sale of stock triggers a tax event. That’s an implication on the tax you owe depending on any gains or losses. Capital gains and losses take two factors into account:
- Change in the value of the stock between trades (both Wall St and AUS).
- Change in the value of the USD/AUD exchange rate between the buy and the sell. This is relevant for Wall St investing only.
On top of share sales, dividend payments immediately are also subject to taxes as they are classified as income. Read here about the U.S. withholding tax on dividends and the benefits of the W-8Ben form we filled out on your behalf when you joined Stake.
Changes in the exchange rate must also be considered when you withdraw funds.
ST/LT
It’s important to know that your capital gains change depending on how long you held the stock.
Short-term capital gains: shares held for less than 12 months are subject to the full applicable tax rate.
Long-term capital gains: shares sold after 12 months may be eligible for a 50% discount on applicable taxes.
🎓 Learn more: What capital gains tax on shares will I pay?→
FIFO
Another acronym, Stake operates under a First In, First Out system. If selling only a portion of your shares, the cost price of the first shares you bought, rather than the average price, will be used when calculating tax.
Example:
You buy 100 shares at $10
Total cost $1,000
Average share price $10
A week later, you then buy 100 more at $15. You now own 200 shares.
Total cost – $1,000 + $1,500 = $2,500
Average share price = $12.50
The price reaches $20 so you decide to sell 100 of your shares.
Even though your average price is $12.50, the first 100 shares purchased at $10 will be sold first.
This triggers $1,000 (100 shares sold at $10 gain) in CGT will be triggered (not considering fluctuation of the dollar).
Stake Tax Tools
From 1 July 2023, you can head to your Stake AUS or Stake Wall St settings and select Tax & Documents. Your full transaction history from the last financial year will be right there. You can export the report as a PDF or CSV to help you complete your returns yourself or with your accountant.
Stella is a markets analyst and writer with almost a decade of investing experience. With a Masters in Accounting from the University of Sydney, she specialises in financial statement analysis and financial modelling. Previously, she worked as an equity analyst at Australian finance start-up, Simply Wall St, where she took charge of the market insights newsletter sent out to over a million subscribers. At Stake, Stella has been key to producing the weekly Wrap articles and social media content.
